Question

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Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:

	Fixed Element per Month		Variable Element per Customer Served			Actual Total for May
Revenue			$	5,400		$	203,000
Employee salaries and wages	$	53,000	$	1,400		$	108,500
Travel expenses			$	750		$	27,700
Other expenses	$	32,000				$	30,800

When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.

Required:

1. What amount of revenue would be included in Adger’s flexible budget for May?

2. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?

3. What amount of travel expenses would be included in Adger’s flexible budget for May?

4. What amount of other expenses would be included in Adger’s flexible budget for May?

5. What net operating income would appear in Adger’s flexible budget for May?

Answer 1

Answer-1)- The amount of revenue would be included in Adger’s flexible budget for May = $216000.

2)- The amount of employee salaries and wages would be included in Adger’s flexible budget for May= $109000.

3)- The amount of travel expenses would be included in Adger’s flexible budget for May= $30000.

4)- The amount of other expenses would be included in Adger’s flexible budget for May = $32000.

5)- The net operating income would appear in Adger’s flexible budget for May = $45000.

Explanation-

ADGER CORPORATION
Flexible Budget
For the month ended May
Particulars		Flexible Budget
		$
Revenue	40 customer served*$5400 per customer	216000
Less:-Expenses
Employee salaries and wages	(40 customer served*$1400 per customer)+$53000	109000
Travel expenses	40 customer served*$750 per customer	30000
Other expenses		32000
Income from opreations		45000